Campus Activewear stock trading near listing price: Analysts predict up to Rs 110 per share gains on receding raw material costs, rising demand

Despite muted third-quarter earnings, analysts are bullish on Campus Activewear – a lifestyle-oriented sports and athleisure brand – which is now placed on the fourth spot in terms of market cap among 10 footwear companies. The firm has an Rs 11,785.27 market cap as of February 15.

The stock, which debuted last year on May 2022 with a bumper listing, closed near the day’s low level at Rs 386.8 per share, down Rs 19.10 or 4.71 per cent on the BSE today, amid below estimate results.

The scrip is trading near its listing price and available at a discount of 40 per cent from its 52-week high of Rs 640 apiece, touched on October 19, 2022.

The company's consolidated net profit declined by nearly 12 per cent to Rs 48.31 crore in the quarter ended on December 31, 2022, as against Rs 54.72 crore in the same quarter a year ago. While its revenue from operations rose 7.4 per cent year-on-year basis to Rs 465.62 crore during the quarter.

Even the margins and profit before tax of the sports brand reported degrowth YoY basis for the third quarter of FY23, according to Campus’ results filing.

In spite of muted earnings, what makes the analysts bullish on the company’s business growth and stock performance. They believe, Campus Activewear has a healthy business outlook on improving volumes, receding raw material costs, and rising demand.

According to analysts at Motilal Oswal, “The ongoing weak environment has slowed revenue growth, however, a cool-off in raw material prices could revive demand as companies pass on the benefits besides, the controlled ad-spending may also boost the profit growth in next fiscal year.”

Campus’s strong market position and healthy sector tailwinds offer a long runway for growth and warrant rich valuations, domestic brokerage Motilal Oswal, said in its report, while maintaining a ‘Buy’ call with a target of Rs 480 a share, which suggests an upside of 25 per cent or Rs 100 apiece.

Mehul Desai of JM Financial is also positive on the stock and maintains a ‘Buy’ rating with a target of Rs 495 per share, implying a potential surge of around 28 per cent or Rs 110 per share.

According to JM Financial analyst, “Campus’ execution on D2C (direct-to-consumer) side remains healthy which helped offset the weakness in trade channel to some extent resulting in overall volume growth, as the company continues to make strong in-roads in the frontier and emerging market.”